1960 (10) TMI 57 - SC - VAT and Sales Tax

As the respondent-company s transactions in question clearly fall within the notification by the State Government dated February 5, 1954, exempting such sales from tax by reason of their nature as well as the assessment years concerned, the respondent- company would be entitled to the benefit of the tax exemption conferred by the notification - Appeal dismissed.

Issues Involved:
1. Liability of the respondent to sales tax under the United State of Travancore and Cochin General Sales Tax Act, 1125 (1950).
2. Whether the sale was "in the course of export" or "in the course of inter-State trade" under Article 286 of the Constitution.
3. Applicability of the Sales Tax Laws Validation Act, 1956.
4. Interpretation of the Explanation to Article 286(1)(a) of the Constitution.
5. Validity and applicability of the notification dated February 5, 1954, exempting certain sales from tax.

Detailed Analysis:

1. Liability of the Respondent to Sales Tax:
The Cochin Coal Company Ltd., referred to as the respondent-company, was assessed for sales tax on the sales of "bunker coal" for the assessment years 1951-52 and 1952-53 by the Sales Tax Officer, I Circle, Mattancherry. The respondent-company contended that the sales were either "in the course of export" or "in the course of inter-State trade" and thus exempt from taxation under Article 286 of the Constitution. The assessing officer rejected this contention, stating that the sales fell within the Explanation to Article 286(1)(a) and were therefore taxable by the State of Travancore-Cochin.

2. Whether the Sale was "in the course of export" or "in the course of inter-State trade":
The High Court held that the sales were in the course of inter-State trade and covered by the ban under Article 286(2). However, this was contested by the State Government, which argued that the Sales Tax Laws Validation Act, 1956, validated the tax. The Supreme Court acknowledged that the transactions were in the course of inter-State trade but noted that the High Court's interpretation of section 26 of the Travancore-Cochin General Sales Tax Act was incorrect based on the decision in M.P.V. Sundararamier & Co. v. The State of Andhra Pradesh & Another.

3. Applicability of the Sales Tax Laws Validation Act, 1956:
The Supreme Court noted that if the respondent-company relied solely on Article 286(2) for relief, the Sales Tax Validation Act, 1956, would validate the levy. However, the respondent-company also argued that the sales were "in the course of export" under Article 286(1)(b). The Supreme Court rejected this argument, referencing the decision in Burmah Shell Oil Storage & Distributing Co. of India, Ltd. v. Commercial Tax Officer, which clarified that mere movement of goods out of the country does not constitute export unless the goods are intended to be transported to a destination beyond India.

4. Interpretation of the Explanation to Article 286(1)(a):
The Supreme Court held that the sales fell within the Explanation to Article 286(1)(a) as the delivery of coal was effected in Travancore-Cochin for consumption in that State. The Court explained that the coal was delivered to the ultimate consumer (the steam-ship company) who could use it within the State or take it outside, but this choice did not detract from the delivery being for consumption within the State. The Court emphasized that the crucial fact was the delivery to the actual consumer who had the liberty to consume the goods wherever desired.

5. Validity and Applicability of the Notification dated February 5, 1954:
The Supreme Court considered the notification dated February 5, 1954, which exempted certain sales from tax. The notification was issued under section 6 of the Travancore-Cochin Sales Tax Act, which allowed the Government to exempt specified classes of goods or persons from tax. The Court found that the respondent-company's transactions fell within the scope of this notification, which exempted sales by non-resident dealers engaged in inter-State transactions, as interpreted in the United Motors case. The Court concluded that the respondent-company was entitled to the benefit of the tax exemption conferred by the notification.

Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's decision in favor of the respondent-company. The Court ruled that the sales of "bunker coal" by the respondent-company were exempt from sales tax under the notification dated February 5, 1954, and thus the respondent-company was entitled to the benefit of this exemption. The appeal was dismissed with costs.

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